Mortgage Interest Rates Remain Low, But for How Long?

Real Estate

Mortgage Interest Rates Remain Low, But for How Long?

Mortgage interest have quietly hit one-year lows, but consumers are not jumping on these new rates. However, mortgage applications increased more than three percent in late February, according to the Mortgage Bankers Association. But this is a tiny increase after an 11 percent decline over the previous four weeks, according to an online article by The Mortgage Reports.

Rates are in the low 4s according to Freddie Mac, but there is no guarantee they will stay that low. Mortgage rate authorities have predicted a big swing in March, but the direction of the swing is unclear. It is probably a good idea for prospective home buyers to lock in a rate as soon as possible.

Rate forecasts for 2018 pretty much came true, according to Tim Lucas, The Mortgage Reports Editor. Most major housing and financial authorities predicted rates somewhere between 4.7 and 5.0 percent. The strange thing is that rates have been dropping since late 2018. If rates do indeed end up at five percent in 2019, they should start rising any day, and that’s what mortgage shoppers are afraid of. Lucas states that if consumers are looking for a good rate on a refinance or home purchase, now might be the time to look.

Freddie Mac reports 30-year fixed rates sank to 4.35 percent the week of February 21, 2019. This is a rate you could get a few months ago only by accepting a 15-year fixed or adjustable rate loan. Thirty-year fixed loans were close to the five percent mark as recently as November.

According to Mortgage News Daily, a prominent source of technical mortgage rate analysis, rates have been in a holding pattern for weeks and are ready to make a big move one way or another this month. With four months of dropping rates. Chances are that this trend is waning and could reverse course soon. Lucas says that if he were to give advice to a mortgage shopper right now, it would be just three words: “Lock, Lock, Lock.”

The Fed, the world’s most powerful financial regulatory body, is now saying it needs to be “patient” before ratcheting up rates or siphoning off assets it collected during the last recession. The Fed has been primarily optimistic about the economy, but seems to be changing its tune.

The Federal Reserve is not as confident in the future as it used to be. In December, it raised rates, but backed off its forecast to hike rates three additional times in 2019. Now it projects just two increases.

Will rates continue to drop? It’s a possibility. However, according to Freddie Mac, rates are already at 12-month lows. So lower rates are becoming less likely. There is a greater chance that rates will rise again soon. According to Lucas, FHA is currently the go-to program for home buyers who may not qualify for conventional loans. And the good news is that you will get a similar rate or even a lower one with an FHA loan that you will get with a conventional loan. Lucas also said that VA mortgages are being offered by local and national lenders, not by the government directly. The public-private partnership offers consumers the best of both worlds: strong government backing and the convenience and speed of a private company.

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